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2023 | Book

Wall Street’s Assault on Democracy

How Financial Markets Exacerbate Inequalities


About this book

On November 24, 2020, in the midst of a global pandemic, the Dow Jones Index surpassed 30,000 points for the first time ever. This historic moment exposed the incredible disconnect between financial markets and society.

The stock market’s one hundred percent rebound was triggered by a massive injection of capital by the US Federal Reserve and by fiscal stimulus measures that reached $16 trillion globally in only a year. It was the taxpayer who came to the aid of the shareholders. This imbalance between low- and high-income individuals has become unbearable and calls into question the mechanisms that allow such an abuse of financial power to exist. This abuse has allowed populism to flourish, in a world where humanism should prevail.

This book invites the reader to understand how such a financial drift of capitalism was even possible and proposes reforms to correct the system. Written by the former Group Executive Vice President for International & Research at the New York Stock Exchange, this volume provides concrete solutions for democratizing financial markets and reintroducing the morals and ethics that these markets and its leaders are so sorely lacking.

Ugeux argues that the purpose of such reforms is to reduce the inequalities which are plaguing our democracies. Citizens are losing hope that equity exists in the system and it has become clear, as fundamental liberties like right voting rights are being threatened – that the problem lies much deeper. Ugeux insists that a change of perspective and a redefinition of societal goals is essential: social and solidarity capitalism is possible only if our leaders listen to the expectations of their citizens.

While it is supported by research and facts, this book includes elements of opinion essays with an educational objective. It aims to educate readers who want to better understand these complex issues, without having to be specialists.

Table of Contents

Introduction: Wall Street’s Denial

Too weak the markets and society becomes unproductive, too weak a democratic community and society tends toward crony capitalism, too weak the state and society turns fearful and apathetic. Conversely, too much market and society becomes inequitable, too much community and society becomes static, and too much state and society becomes authoritarian. A balance is essential.

Georges Ugeux
2022: The Year When the Veil of the Temple Was Torn

On November 24, 2020, in the midst of the second phase of lockdown, the Dow Jones Industrial Average (DJIA) surpassed 30,000 points to the delight and delirium of Wall Street. Since its brutal fall in March 2020, the index had risen by more than 100%, seemingly unaffected by the structural consequences of a pandemic that had rocked the planet.

Georges Ugeux
2023 or the Year Depositors Were Favored with Public Money: SVB, FRB, and Credit Suisse

If we needed the demonstration that the authorities are too afraid of a financial crisis to apply their own rules and, instead, use public money, 2023 demonstrates the inability of those authorities to apply their own rules.

Georges Ugeux
The Disconnect with the Real Economy

On the one hand, the real economy had to face a brutal recession in 2020, characterized by an abysmal unemployment rate and household purchasing power at half-mast, which in turn led to a dizzying decline in corporate profits. Despite the recovery of 2021, the first quarter of 2022 saw a 1.4% decrease in the US GDP in the first quarter, followed by a 0.9% decrease in the second quarter.

Georges Ugeux
An Unsustainable Inequality

The imbalance of individual wealth has recently grown to create a profoundly inequitable society.

Georges Ugeux
Financial Accountability

As we become aware of this unbearable inequality, the question of responsibilities opens before us. The multiplicity of actors makes it difficult to assign responsibility. Who should absolve us for the excesses and abuses that are developing in the financial sphere?

Georges Ugeux
The Pillars: Issuers and Investors in Search of Growth and Profit

The heart of the financial markets is the meeting between issuers and investors. This is known as direct intermediation, where the same instrument is issued by the company or government and purchased by the investor without going through the balance sheet of a financial institution or any form of transformation. For companies, this is a crucial element of their financial stability. In fact, the bond markets make it possible to obtain fixed-rate debt as well as variations on this theme that the banking system is not able to provide. Given the amount of equity that banks must allocate to grant credit and the intermediation margin, it is financially strategic for companies not to depend solely on bank financing.

Georges Ugeux
Companies Looking for Equity and Long-Term Financing

The primary player in the financial markets remains the companies that finance their investments and growth through share and bond issues. They are the backbone of the economy. They are the ones who generate productive jobs. They are the ones who provide goods and services. It is governments who can facilitate, not create economic growth. It is precisely because of this essential mission that their role cannot be limited to themselves but extends to society and its diversity as a whole.

Georges Ugeux
Investors Look for Valuable Assets

The spectrum of investors ranges from individuals to pension funds and the whole kaleidoscope of channels through which they decide to invest their assets. The variety of their objectives is immense and ranges from altruism to short-term gains to value creation. It is this diversity that explains the very existence of financial markets. If all investors had the same objectives, there would be no market.

Georges Ugeux
The Operators in Search of Liquidity

The world of market operators is sometimes difficult to discern and is not characterized by its transparency. For the sake of simplicity, I will distinguish the operators whose job is to trade on behalf of investors, without forgetting that investors and issuers are the most important liquidity providers. Traders do not act with the objective of becoming shareholders, and they only remain owners of financial assets for a noticeably brief time. They are not investors. They are the powerful force behind liquidity and volatility.

Georges Ugeux
Banks at the Heart of Conflicts of Interest

Banks are everywhere and intervene in several capacities. Commercial banks and asset managers operate on the debt market and are borrowers. They operate in the equity market as market makers as well as brokers. They invest in bonds and advise issuers. In short, they are a nexus of conflicts of interest that has grown since the investment banks were taken over by the commercial banks.

Georges Ugeux
Are Public Authorities Complicit or Ignorant?

The year 2020 has highlighted the growing importance of the public sector in the capital markets. It was governments and government agencies that intervened massively and quickly to prevent a collapse of the system. Their interventions reached $16 trillion in the last 12 months, according to IMF (International Monetary Fund) statistics.

Georges Ugeux
Central Banks to the Rescue of Financial Markets and Borrowers

Before opening this chapter, I would like to clarify a few points. Central banks are often caught between a rock and a hard place. In most cases, they have to integrate the difficult indebtedness of their governments. This is not only true in emerging markets—the dramatic explosion of sovereign debt has made central banks the largest individual owners of their countries’ sovereign debt.

Georges Ugeux
An Ecosystem at the Service of the Corporate World

A whole ecosystem is currently supporting capital markets, one that is complex and not at all transparent, where the balance of power has little to do with democracy. The combination of interests that meet in the lair of the markets seeks to favor companies, their managers, and their shareholders.

Georges Ugeux
Financial Markets Operate in Their Own Interest

The purpose and mission of financial markets is to facilitate exchanges between investors and issuers. This is their raison d’être. Over time, this objective has been diverted to make the interests of financial market participants a new raison d’être. They do not make money by serving the markets; they drive the markets to make money for them.

Georges Ugeux
The Growing Impact of Financial Markets on Households

One of the most pressing issues is the protection of individual investors.

Georges Ugeux
Is Financial Innovation Making Financial?

It is as absurd to be “for” as it is to be “against” technological and financial innovation.

Georges Ugeux
When the Ideology of the Markets Defies Democracy

The road we have travelled comes from an observation of unbearable inequality. In order to dismantle its source, we must focus our attention on both the behavior of the actors and the detour of the capital markets from their primary mission toward the interests of the markets and their actors, becoming an end in itself.

Georges Ugeux
Capital Markets, Politics, and Policies

Yes, financial markets need political support to promote their ideology and politicians coalesce around capital.

Georges Ugeux
The Role of Taxation in Capital Inequalities

Tax fairness is an essential element of democracy and trust in corporate leaders and governments. Corporations have succeeded in shifting taxes to consumption through taxation that penalizes the poorest. They have used globalization to force the political world to reduce the direct tax burden on them.

Georges Ugeux
An Undemocratic Coalition of Hostile Interests

The various aspects of this section demonstrate the urgency of a reform that will avoid the fact that large companies who fund political parties and candidates, and other contributors albeit to a lesser extent, constitute an objective coalition of interests. Taxes in developed economies have now become a critical part of inequalities.

Georges Ugeux
For a Democratic Reform of Financial Markets

The rebalancing of financial markets requires a profound revision of the objectives of the institutions and individuals who participate in them. Few of them will even accept a diagnosis that has become obvious: the prevailing ideology is the search for individual interest in this great Circus Maximus.

Georges Ugeux
The Public Sector Must Reduce Its Dependency on Wall Street

The power of financial markets, their regulation, and the support of central banks have diverted the public sector from its social and economic responsibilities. At the heart of this observation is the question of the purpose of the state.

Georges Ugeux
Refocusing Central Banks on Monetary Policy

What do central banks have to do with funding governments? When did they decide to reach out to the liquidity of the stock markets? How did their interest rate policies spread from short-term to long-term interest rates, managing and massaging the yield curve? Why are they expected to follow policies for growth and employment? How could they have grossly ignored the inflation risk of their massive injections of funds during the pandemic?

Georges Ugeux
Redeploying the Corporate World on Its Mission

Like every large institution the corporate world is between admiration and hate. But it needs trust.

Georges Ugeux
Making Investors Accountable

What happened after the release of the Larry Fink and the Business Roundtable statement that companies should include values other than profits?

Georges Ugeux
Promoting Fair Markets

It is vital to understand the various aspects that contribute, both in the public and private sectors, to transforming financial markets into a gigantic machine that crushes equity. A democracy that allows a system that neither imposes nor exercises societal responsibilities is not trustworthy. The events of 2020 were a life-size demonstration of the disconnection of markets in a major economic and employment crisis.

Georges Ugeux
Rebalancing Labor and Capital Through Taxation

It is inconceivable to establish an equitable relationship between the social body and finance without raising the question of the contribution of the various players in the financial markets to the state budget. Public finances cannot be based solely on the taxation of work and consumption.

Georges Ugeux
Reconciling Shareholders and Society

Financial capitalism is in conflict with society, absolving itself of any responsibility toward it. Every member, individual, or institution has a societal responsibility and cannot escape it. Without giving up its raison d’être, the company and its shareholders must identify and assume the role they play in the society in which they operate, in their country and abroad.

Georges Ugeux
Strengthening Financial Regulation

Although it is a sovereign function, regulation must be removed from the clutches of business and government. Too often, we have seen immunities granted to the powerful and harsh penalties imposed for minor misdeeds.

Georges Ugeux
Promote Education, Information, and Honest Communication

The only way to reduce inequalities is through education.

Georges Ugeux
The Governance of Markets: An Opportunity for Europe

In this period of crisis, the financial message has become political.

Georges Ugeux
Renewing the Threads of Trust in Finance: An Ethical Endeavor

In June 2022, the Rockefeller Foundation published a report on “the urgency of equity.”

Georges Ugeux
These Books Inspired Me

Jacques de la RosièrePutting an End to Financial Illusion2022 Odile Jacob Editions

Georges Ugeux
Wall Street’s Assault on Democracy
Georges Ugeux
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